Give Away the Reader and Sell the Content - Netbook Makers Try Gillette Razor Business Model

"Personal computers — and the companies that make their crucial components — are about to go through their biggest upheaval since the rise of the laptop," say Ashlee Vance and Matt Richtel in the New York Times. "By the end of the year, consumers are likely to see laptops the size of thin paperback books that can run all day on a single charge and are equipped with touch screens or slide-out keyboards." What's more, say Vance and Richtel, they will be priced somewhere between pocket change and free. Free?

Free. Because, as we've been urging for some time, by giving away the device but selling or leasing the content package, you can make more - and more reliable - money. This is what I call the Gillette Razor Theory - give away the razor and sell the blades - and now it may be happening in PC-world. AT&T will provide customers with a netbook at the low low price of $50.00. But - you have to sign up for an Internet service plan, say the Times reporters. An unnamed wireless phone company goes AT&T one better - a free netbook, but again you have to commit to a data plan - the "razor blades" part of the bargain.

That's not necessarily the biggest downside of the program. Netbooks are mini-laptops offering the bare minimum of functionality to people who are okay with the bare minimum. If you're addicted to Youtube or videogames, you might have to abandon all hope of accessing them. For free or fifty bucks you get a Model T Flivver "in any color," as Henry Ford might say, "as long as it's black." However, some manufacturers may be able to get over that hurdle, too. By employing Linux or Android technology, effecting savings, they may be able to load more goodies into the box.

If that were all there is to the story we'd be happy enough. We've been waiting decades for the $99 computer and all of a sudden we seem to be zooming past it into Zeroland. But the bigger news by far is that netbooks may represent the revolutionary leading edge of the next generation of personal computers.

"So far," the Times article says, "netbooks have appealed to a relatively small audience. Some of the devices feel more like toys or overgrown phones than full-featured computers. Still, they are the big success story in the PC industry, with sales predicted to double this year, even as overall PC sales fall 12 percent, according to the research firm Gartner. By the end of 2009, netbooks could account for close to 10 percent of the PC market, an astonishing rise in a short span." In other words, the economy's loss is the PC industry's gain. If people can't afford a fully loaded laptop, for under $100 they'll learn to live with skimpy.

To learn more, read Light and Cheap, Netbooks Are Poised to Reshape PC Industry

RC